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Fee Split Financial Model

This model estimates protocol, creator, LP, and proof submitter revenue under the default fee configuration. It captures per-market flows and aggregates to daily/weekly projections to validate sustainability targets.

Assumptions

  • Quote asset: USDC (1:1 with USD for simplicity).
  • Average market lifespan: 14 days from launch to settlement.
  • Average trade volume per market: Adjustable; base case 250 000 USDC total notional.
  • Open interest at settlement: 50 000 USDC.
  • Proof bounty: 250 USDC (funded from settlement fee).
  • Creator stake: 50 USDC (returned on clean resolution; ignored in revenue calc).

Default fees (from docs/tokenomics.md): - Trading fee: 2.0 % (1.0 % LP rebate, 0.75 % Treasury, 0.25 % creator). - Settlement fee: 0.5 % of resolved pool (0.35 % proof bounty, 0.15 % Treasury).

Per-Market Revenue Breakdown

Let: - V = total trading volume. - O = open interest at settlement.

Trading Fees

  • Total collected: TradingFee = V * 0.02.
  • Allocation:
  • LPs: TradingFee_LP = V * 0.01.
  • Mentat Treasury: TradingFee_Treasury = V * 0.0075.
  • Creator: TradingFee_Creator = V * 0.0025.

Settlement Fees

  • Total collected: SettlementFee = O * 0.005.
  • Allocation:
  • Proof bounty pool: SettlementFee_Proof = O * 0.0035.
  • Treasury: SettlementFee_Treasury = O * 0.0015.

Example (Base Case)

V = 250,000 USDC
O = 50,000 USDC

Trading fees:
  Total = 5,000
  LPs = 2,500
  Treasury = 1,875
  Creator = 625

Settlement fees:
  Total = 250
  Proof bounty = 175
  Treasury = 75

Treasury total per market = 1,950 USDC.
Proof submitter max bounty = 175 USDC (scaled by SLA).
Creator revenue per market = 625 USDC (excluding stake return).

Daily/Weekly Projection

Let M be markets settled per day, C markets created/active. Assume average volume/interest as base case.

Daily Treasury Revenue

Treasury_daily = M * (0.0075 * V + 0.0015 * O)

Example: M = 6 markets/day
Treasury_daily = 6 * (0.0075 * 250,000 + 0.0015 * 50,000)
              = 6 * (1,875 + 75)
              = 6 * 1,950
              = 11,700 USDC/day

Weekly Proof Payout Budget

Proof_bounty_weekly = 7 * M * (0.0035 * O) * SLA_factor
Where SLA_factor represents the average percentage paid based on timeliness: - If 70 % of proofs arrive on time, 20 % delayed, 10 % late: 
SLA_factor = 0.7 * 1.0 + 0.2 * 0.5 + 0.1 * 0.1 = 0.7 + 0.1 + 0.01 = 0.81
Example with M = 6: 
Proof_bounty_weekly = 7 * 6 * (0.0035 * 50,000) * 0.81
                    = 42 * 175 * 0.81
                    = 42 * 141.75
                    ≈ 5,953.5 USDC/week

Creator Earnings

Creator_daily = C * (0.0025 * V)
Example: C = 8 active markets generating volume per day
Creator_daily = 8 * 625 = 5,000 USDC/day (aggregate across creators)
Per creator depends on share of markets launched; distribute proportionally.

LP Earnings

LP_daily = C * (0.01 * V)
Example: 8 markets → 8 * 2,500 = 20,000 USDC/day (split across LP positions).

Sensitivity Table (Treasury Revenue per Market)

Volume (V) Open Interest (O) Treasury Revenue
100 000 25 000 780 USDC
250 000 50 000 1 950 USDC
500 000 100 000 3 900 USDC
1 000 000 150 000 7 425 USDC

Formula: 0.0075 * V + 0.0015 * O.

Break-Even Considerations

  • Estimate fixed operating costs (AI API, infra, staffing). Example: 4,000 USDC/day.
  • Required markets per day to break even: solve M * 1,950 ≥ 4,000 ⇒ M ≥ 2.05. Target at least 3 settled markets/day.
  • Include proof payouts when calculating net treasury: NetTreasury = Treasury_daily - Proof_bounty_daily (portion paid) - Stipends.

Scenario Planning

  1. Low Volume Launch: V=100k, O=20k, M=2 ⇒ Treasury ≈ 1,500 USDC/day. Need higher market count or adjust fees.
  2. Growth Phase: V=400k, O=80k, M=8 ⇒ Treasury ≈ 25k/day; enough to fund grants, liquidity mining.
  3. Stress Test: Increased disputes causing 10 % of markets to resolve invalid. Slash stake adds 0.5 * Stake per invalid market to Treasury, offsetting lost fees.

Usage

  • Update assumptions quarterly based on real metrics.
  • Build spreadsheet or dashboard using these formulas for live revenue monitoring.
  • Feed Treasury projections into budget planning for audits, grants, and curator stipends.